Update 29 November 2016

Superannuation Betrayal Day

Last Wednesday 23 November 2016 was Superannuation Betrayal Day.

On that day, the Coalition Government, with the support of Labor, rushed through Parliament two of its three superannuation Bills.

Passing those Bills betrayed the trust of many Australians and undermined the certainty of superannuation as a long-term savings plan for retirement.

The third superannuation Bill, the Superannuation (Objective) Bill, has been referred to the Senate Economics Legislation Committee (“Senate Committee”) to report in February 2017.

So the Parliament has passed substantial changes to the superannuation law before it determines the objective of that law. Go figure!!

Save Our Super’s future plans

As to the superannuation changes, the enactment of the current legislation is not the end of the story. There are a lot of angry and dismayed Australians who continue to feel betrayed by the Coalition and Labor. They are very unhappy with the super changes and are not remaining silent. A number have already contacted us to voice their disgust with the Government’s conduct.

Save Our Super has commenced planning for its continuing campaign. Save Our Super is not going into retirement!

Senate Committee’s Report

On 17 November 2016 Save Our Super lodged its joint submission with the Senate Committee, as did a number of our supporters. You can find the Save Our Super’s submission here.

On 22 November 2016 both Bills passed the House of Representatives, unamended.

At 9.31am on 23 November 2016 the Senate Committee’s Report into those Bills was tabled in the Senate chamber. For the Senate Committee Report, click here

On 23 November 2016 Save Our Super sent a copy of the joint submission to Andrew Gee MP and Scott Bucholz MP, the Chairman and Secretary respectively of the Coalition Backbench Committee on Economics and Finance and CC:d it to all Coalition Senators and MHRs.

On the same day, 23 November 2016,  The Australian published APRA’s super data for the  September quarter 2016, which APRA had released the previous day (on Tuesday  22 November 2016); Michael Roddan’s article, “Super doubts drain $1.5bn out of system”, The Australian, Wednesday, 23 November 2016, page 19 can be found here.

Interestingly, on the very day APRA released its September data, (Tuesday 22 November 2016) Kelly O’Dwyer told the Industry Super Australia Conference:

Thank you, everyone, for that warm welcome — it’s wonderful to be with you for the Superannuation Opportunity Forum. Today is an opportunity for reflection. Superannuation, as most of you know, is a two-trillion dollar — and growing — industry.” The speech can be found here.

In fact, as the APRA data suggests, it is not growing; it is a shrinking industry. The only thing that is now likely to grow are the number of superannuation and financial advisers and their fees!

On 23 November 2016, we sent a copy of the joint submission to Andrew Gee MP and Scott Bucholz MP, the Chairman and Secretary respectively of the Coalition Backbench Committee on Economics and Finance and CC:d it to all Coalition Senators and MHRs. In that email, amongst other things, we drew their attention to the APRA data.  The email stated:

Dear Sirs

We write to you again in your capacities as leaders of the Coalition Backbench Committee on Economics and Finance. Please find attached a copy of a joint submission on the Government’s superannuation measures lodged on 17 November 2016 with the Senate Economics Legislation Committee. The submission was made by us on our own behalf, and on behalf of Save Our Super. (http://saveoursuper.org.au )

Save Our Super has argued that it is necessary to grandfather the measures in the Budget that reduce the living standards of those already retired and restrict the savings efforts of those too close to retirement to change their life saving plans.  Grandfathering is necessary to preserve trust in super and in government rule-making approaches to super saving. A destruction of trust in super would damage the budget rather than improve it, because it would reduce net super saving and increase reliance over time on the aged pension.   Before the Government had drafted its legislation, we presented those arguments in more general terms to you and Coalition MPs in Terrence O’Brien’s e-mails of 8 and 19 September 2016 and our joint e-mails of 18 and 24 October 2016 .   

After the introduction by Treasurer Morrison on 9 November 2016 of the Bills and an Explanatory Memorandum for the super measures, the public has been given just four working days to make submissions on the Bills to the Senate Economics Legislation Committee. The Committee in turn has been given four working days to report on the measures. It is already apparent from 125 public submissions to Treasury on three earlier tranches of exposure drafts that there are serious conceptual and practical problems with the approach in the Bills that add to our concerns about the destruction of trust in super and super rule-making.

Terence O’Brien’s letter to you of 8 September 2016 noted that the Australian Prudential Regulation Authority’s quarterly superannuation performance statistics for the June quarter 2016 were showing marked declines in personal contributions to super of over 10% (year to end-June 2016 over year to end-June 2015) following three years of double digit growth. (Personal contributions are mainly the concessional and non-concessional contributions to be further restricted under the Budget measures. Since personal contributions are by far the largest source of overall member contributions, the latter also declined by about the same percentage.)

Such a decline was easily understood: the Greens and Labor had been promising significantly to increase tax on super since March and April 2015, respectively.   The Coalition proposed in effect tripling the Labor tax increases in the 3 May 2016 Budget, providing cover for Labor then to triple its original tax grab.  So super savers and self-funded retirees knew by May that their retirement living standards from super savings were sure to decline whatever the election result in early July, and through chaotic policy processes likely to lead to further tax raids in future.  So they commenced rebalancing their lifetime saving plans away from super in the June quarter 2016. We predicted that when the September quarter’s data become available in November, capturing a full three months of savers’ reaction to the new super landscape and the election outcome, they would confirm and extend the contraction apparent in the June quarter.

With yesterday’s release of APRA data to end September 2016, the decline in personal contributions has accelerated as we predicted to almost 30%, September quarter 2016 on previous September quarter (or 17% year to September 2016 over previous year to September).  As we argue at pages 14-15 of the attached submission, these accelerating declines in personal contributions suggest the net effect of the Government proposals will be to reduce savings in super over time, and increase retirees’ reliance on a blend of lower super balances and a part age pension.  Savers’ confidence in super is being destroyed, and the net adverse impact of retirement income policy on the budget will gradually worsen.

This has the makings of a slow-motion retirement income policy catastrophe, about which the Government has been abundantly forewarned.

Our attached submission argues that the Senate Committee should take more time through public hearings to examine the implementation of the budget proposals, which are radical reversals of super tax strategy that damage savers’ confidence that their life savings will be governed by predictable, intelligible rules.

We are copying this correspondence and its attachments to other Coalition Senators and MHRs.

To date, Save Our Super has not received any response to that email.